World cereal supplies set to hit all-time high, says FAO

Geneva (Kanaga Raja) – World cereal supplies are expected to rise to an all-time high of nearly 3,331 million tonnes in the 2017/18 season, the Food and Agriculture Organisation of the United Nations (FAO) has said in its latest forecast.According to its Cereal Supply and Demand Brief released on 1 February, FAO said based on the current supply and demand forecasts for the 2017/18 marketing season, “global markets of all major cereals remain well balanced, supported by record inventory levels and evidenced by above-average stocks-to-use ratios.”
According to FAO, the stocks-to-use ratio is expected to rise to its highest level in 16 years.
FAO said its estimate for global cereal production in 2017 now stands at a record high 2,640 million tonnes, 1.3 percent above the 2016 estimate.
This estimate has been raised by 13.5 million tonnes since December, marking a second consecutive substantial upward revision.
FAO has forecast world production of coarse grains in 2017 at 1,381 million tonnes, up 2.6 percent, or 35 million tonnes, from the previous year.
This latest estimate is some 9 million tonnes higher than was reported in December.
Most of the revision was accounted for by larger maize production levels in China, thanks to higher yields than earlier anticipated, and in the European Union, where the maize harvest in Romania proved better than previously expected.
Maize production has also been revised upwards in Mexico, following increases in yield and acreage.
FAO has also raised its forecasts for global wheat production in 2017, by 2.8 million tonnes. World wheat production now stands at only 3.7 million tonnes below the record harvest in 2016.
Higher production estimates for Canada and the Russian Federation accounted for the bulk of this month’s increase, said FAO.
FAO has also raised by 1 million tonnes to 501.9 million tonnes, its estimate for world rice production in 2017.
“The improved prospect mostly reflects an upward revision in China (Mainland), which has more than offset lower production estimates for Viet Nam and some other countries.”
The latest estimate puts the global production of rice in 2017 at nearly 1.2 million tonnes above the record level reached in 2016.
FAO has forecast world cereal utilization in the 2017/18 season at nearly 2,603 million tonnes, up 35.7 million tonnes (1.4 percent) from 2016/17 and also 3 million tonnes above the December forecast.
The increase from December mostly reflects upward adjustments made to the feed-use of coarse grains (mostly in China, the EU, Mexico and the Russian Federation), more than offsetting a significant downward revision to the non-food use of wheat (mainly in the EU and the Russian Federation).
Global wheat utilization in 2017/18 is forecast to reach around 734 million tonnes, down 6 million tonnes from December and only 1.5 million tonnes (0.2 percent) above the 2016/17 estimated level.
FAO said the increase from the previous season is now smaller than was anticipated earlier, primarily because of lower demand for feed wheat in view of ample supplies of cheaper coarse grains in global markets.
Food use of wheat, however, is still projected to increase by 1.1 percent, to almost 504 million tonnes.
In contrast, FAO has raised its forecast for total utilization of coarse grains in 2017/18 to 1,365 million tonnes, 8.5 million tonnes higher than in December. This was mostly on upward revisions to the feed use of maize and barley.
At this level, world utilization of coarse grains would be some 28 million tonnes (2.1 percent) above the 2016/17 estimated level, with feed use reaching an all-time high of 764 million tonnes, up 1.8 percent from the 2016/17 estimated level. The largest increases are projected for China, Brazil, the EU and Mexico.
FAO has forecast global rice utilization to sustain an annual 1.2 percent growth and reach 503.7 million tonnes in 2017/18, some 700,000 tonnes higher than the December forecast.
“The expansion is foreseen to be mostly driven by a steady increase of food use, while other end-uses are projected to remain largely stable compared with last year’s levels.”
FAO has projected world cereal stocks to rise by almost 36 million tonnes (5 percent) from their already record high opening levels to 739 million tonnes.
This is 12.8 million tonnes above the December forecast, leading to the world stocks-to-use ratio of cereals remaining comfortable at 27.7 percent, up slightly from 2016/17 and the highest since 2001/02.
According to FAO, this month’s higher forecast for world cereal reserves largely reflects an upward revision (12.8 million tonnes) to global wheat stocks (ending in 2018), which are now forecast to hit an all-time high of 270 million tonnes, as much as 21 million tonnes (8.7 percent) above their already high opening levels.
“The bulk of the increase is foreseen to result from stock buildups in the EU and the Russian Federation.”
FAO noted that while maize inventories are set to reach a new record of 248 million tonnes, up 12.5 million tonnes (5.3 percent) from their opening levels, world barley stocks are heading towards a decline of 1 million tonnes, to 26.4 million tonnes.
The forecast of world rice stocks (ending in 2018) varied little since December and has been maintained at 170 million tonnes, 1.6 million tonnes higher than their opening levels.
FAO has forecast international trade in all cereals to approach 404 million tonnes in the 2017/18 season, only 1.8 million tonnes (0.4 percent) below the previous season’s record volume. Trade in all the major cereals, except for maize, is seen to contract.
World wheat trade in 2017/18 (July/June) is pegged at 175 million tonnes, down 2 million tonnes (1.4 percent) from 2016/17 and 500,000 tonnes lower than the December forecast.
“The decline from the previous season reflects expectations of smaller purchases by China, India, Morocco and Thailand, more than offsetting higher imports by Egypt, Indonesia and South Africa,” said FAO.
Global trade in coarse grains in 2017/18 (July/June) has been raised by 1 million tonnes since December to 183 million tonnes and is now much closer to the record volume of 184 million tonnes in 2015/16.
The increase reflects expectations of larger trade in barley driven mostly by stronger import demand in China and Iran.
World trade in maize is set to increase by 3.2 million tonnes (2.3 percent) in 2017/18 to a record level of 143 million tonnes, unchanged from December.
The projected trade expansion in 2017/18 reflects higher import demand forecasts for several countries, in particular China, Egypt, Mexico and Saudi Arabia.
FAO has projected world trade in rice in 2018 at 46 million tonnes, marginally below the December forecast and 1 million tonnes lower than the revised estimate for 2017.
“The revision since December mainly reflects expectations of reductions in exports by India, the United States and Thailand, outweighing a larger export forecast for Myanmar.”
PRICES OF KEY FOOD COMMODITIES
Meanwhile, FAO’s Food Price Index, also released on 1 February, averaged 169.5 points in January 2018, nearly unchanged from December 2017. However, it was almost 3 percent below the corresponding period last year.
The FAO Food Price Index is a trade-weighted index that tracks the monthly change in international prices of a basket of key food commodities.
FAO said while firmer prices were registered for cereals and vegetable oils in January, dairy and sugar values were generally weaker and meat quotations remained steady.
The FAO Cereal Price Index averaged 156.2 points in January, a rise of almost 2.5 percent (4 points) from December and 6.3 percent from January 2017. The index tracks wheat, rice and course grains including maize.
Despite large supplies, wheat and maize prices received some support from a weaker US dollar as well as concerns over weather.
International rice values continued to firm up in January, sustained mainly by renewed Asian demand, said FAO.
The FAO Vegetable Oil Price Index averaged 163.1 points in January, virtually unchanged from December.
FAO reported that moderate rises in palm oil values were outweighed by weakening prices for other oils, notably sunflower and rapeseed oils.
“International palm oil quotations strengthened as global import demand picked up just when seasonal production declines were looming in Southeast Asia,” it said.
In contrast, rapeseed oil prices were pressured by both excess supplies in the EU and larger than expected availabilities in North America and Australia, while those of sunflower oil were affected by sluggish global import demand.
The FAO Dairy Price Index averaged 179.9 points in January, down 2.4 percent (4.5 points) from December 2017.
The month saw a decline in international price quotations for butter and cheese while that of milk powders increased.
According to FAO, one factor that heavily influenced global dairy prices, including the fall in prices of butter and cheese, was the abundant milk supplies in the northern hemisphere and Australia.
However, the possibility for seasonal milk production in New Zealand to be lower than expected lent support to Whole Milk Powder (WMP) prices. Strong import demand also mostly led to an increase in Skim Milk Powder (SMP) values.
The FAO Meat Price Index averaged 170.6 points in January, almost unchanged from its slightly revised value for December 2017.
International price quotations for poultry and pigmeat continued to slide due to higher export availabilities amid weak import demand, said FAO.
“Prices of bovine meat were up marginally, reflecting lower quantities offered for sale from Oceania, while those of ovine meat [lamb and mutton]rose supported by strong international demand, especially from Asia and the Middle East.”
Meanwhile, the FAO Sugar Price Index averaged almost 201 points in January, down 1.6 percent (3.2 points) from December and as much as 30.4 percent below the corresponding month last year.
FAO said international sugar quotations remained under downward pressure mostly because of strong production outcomes in major producing countries and, hence, ample export availabilities. (Published in SUNS #8614 dated 5 February 2018)